A Talk with Peter Underwood, Part 1

Few foreigners are as knowledgeable and influential on the South Korean business scene as Peter Underwood, senior partner at IRC Ltd., the Seoul consulting firm that has been a bridge for international firms doing business here and vice versa for more than two decades.

Urged by friends, Mr. Underwood recently published a book in Korean called “First Mover.” It examines the transition South Korean businesses and the country as whole is making into setting the pace in industries – a change from the historic role of “fast follower.”

Mr. Underwood got the normal dose of attention, and a bit of criticism, when the book came out. Part of the criticism was that he was critical of South Korea.

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In the first of a two-part interview, Mr. Underwood discusses the book’s big ideas.

WSJ: What is the main message you wanted to deliver in the book?

Mr. Underwood: The whole idea is that Korea is moving past the fast follower, the copy stage, the catch-up stage. Now we are a first mover, setting the pace, blazing the trail, whatever analogy or phrase you want to use.

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In order to do that, we need a new culture, a new set of practices, education strategies and so on in order to take a leadership role.

Part of the problem is the very characteristics of Korean society and Korean people that have made the country successful up to now are now impediments to the new environment. Things like hierarchy and groupthink and homogeneity help to marshal resources and focus resources well. But it doesn’t help to find new routes.

When you know where you’re going, then Korea’s traditional society was very well organized to make things happen. But now, when the direction is unclear, you need an environment that will allow ideas to bubble to the top and compete. You need a culture that can analyze and evaluate alternative ideas, strategies, inventions, concepts. And then, choose the right one.

Korean education and society doesn’t do that yet. Instead, people are taught there is a right answer. You go to school and everyone crams facts in your heads. One of the phrases I use in the book is, “The brain is not a memory storage device,” which is what it is being used for here.

WSJ: You have framed the ideas in an aspirational way, which seems like it ought to appeal to Korean readers.

Mr. Underwood: I’ve been criticized for being critical of Korea. And I am critical of Korea in the positive sense of critical. I have aspirations. I believe in Korea. I’m confident that Korea will overcome. If you look at the history, you see when there’s been an obstacle, Korea has overcome. The tools that we need in the future are different from what we’ve had in the past.

Korea sets impossible targets for itself and repeatedly overachieves them. That’s been true in the past and I think it will be in the future.

Korea is already surpassing Japan. Not in terms of overall size of economy but in taking the lead in industries. Look at Sony and Samsung. Ten years ago, Sony scoffed at Samsung and now Samsung is leaving them in the dust.

WSJ: One of the things about Samsung is that, even though they’ve become the biggest technology company on the planet, they don’t act that way and the local media doesn’t ever talk about them like that. And even when South Korea is doing things like hosting the G-20, there seems to be a kind of disbelief that the country is actually a leader.

Mr. Underwood: There’s a very odd element of the Korean character that is a combination of tremendous self-confidence and at the same time a lack of confidence. That’s one of the puzzles I haven’t quite figured out about Korea. I’ve spent a lot of time thinking about it.

Koreans create something of a trophy culture. They need public acknowledgement that they’ve made it. That’s why they’re so proud of the G-20, the World Cup or the Winter Olympics. They need these trophies. They need these external assurances that the world takes them seriously because, as you said about Samsung, they don’t really believe it yet.

I think it’s related to the education system. Koreans haven’t learned or don’t value the critical thinking that we do in the West. They don’t know those skills. And that’s where confidence comes from, the confidence to analyze something and prove it, like a theorem. We learn that in our education system at a very young age and we don’t have that at all in Korea.

That’s what you need for self-confidence. If you say, “Why do you think you’re qualified to do this?” to a Korean job-seeker, they will pull out their certifications and degrees, external certifications that they’re qualified, rather than developing an argument that “I did this job and this task.”

About four or five years ago, the American Chamber and KITA had a New Year’s lunch, which was put together very quickly. But that turned out to be fortunate because there were very few Americans and I was put at a table with eight or ten Koreans and only one other American and he could speak Korean as I can.

And so, the two foreigners at the table could speak Korean and the discussion really got going. It was a very interesting discussion. I forget what the issue was, whatever the issue of the day was, and I was putting out some ideas and we were having a great debate. And the people at the table were really senior people, and we were having just a typical Western, almost debate about an issue. I’m thinking this is fantastic.

Then one of them said, “Hey Peter, who told you that?” And I explained, “Well, what do you mean? This happened, this is going on, these people are saying this and you can see the pattern.” But he said, “Well, who told you?” And I said, “What do you mean? You can see it. You can observe it. You don’t need anybody to tell you. Nobody told me that.”

And as soon as I said that it was my idea and not an idea of a professor or a famous person, the discussion stopped. Even though I could show the thought progression, the intellectual progression that led me to the points I was making, because I didn’t have a professor or Nobel laureate whose line I was parroting, the idea was dismissed.

This shows a lack of confidence of the ability to analyze, evaluate and accept or reject. And if that was the leadership of Korea, granted it was five or six years ago, then we’ve got a long way to go.

Tomorrow: Thoughts about competing with other countries and the tension between big and small companies.